WASHINGTON, March 24 (Reuters) - Low U.S. interest rates must rise as the economy gathers steam, and while that point has not yet been reached, businesses and markets should keep it in mind, a top Federal Reserve policy-maker said on Wednesday.
Federal Reserve Bank of Atlanta President Jack Guynn, in remarks very close to those he made in a speech earlier this month, issued a hawkish warning that as growth picks up, ultra-low U.S. borrowing costs will head higher.
"The Fed has good reason to maintain its accommodative policy, at least for now. But if my forecast for more robust economic growth materializes, then, at some point, a fed funds rate of 1.00 percent will no longer be the best policy," he told an audience in Jackson City, Tennessee. A copy of the speech was released to media in Washington.
Noting the Fed said last week it could be patient in removing its policy accommodation after holding rates at a post 1958-low of 1.00 percent, Guynn signaled there might be risks with this strategy.
"I remind myself that it is important to watch for unintended consequences of keeping monetary policy too accommodative for too long.
"Indeed, some of my contacts in various businesses have stressed to me that at some point, it will be appropriate, and helpful, to allow interest rates to return to more normal levels so that markets can sort themselves out in an orderly way and return to balance."http://www.forbes.co...rtr1310137.html